The spirit of Proposition 13 four decades after its passage

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A home for sale in Chatsworth in March. The initiative backed by the California Association of Realtors would allow homesellers 55 and older to take their low property tax base with them when they sell their home and move within the state. (Photo by Dean Musgrove, Los Angeles Daily News/SCNG)

Forty years ago this week, on June 6, 1978, California voters sent a clear message that they would no longer tolerate excessive property tax increases.

The passage of the People’s Initiative to Limit Property Taxation has proven to be one of the great landmark initiatives in state history.

Passed at a time when the crippling inflation of the 1970s sent property taxes through the roof, burdening low-income and elderly property owners the most, its passage four decades ago has proven essential in protecting California property owners from unchecked and unjust tax increases.

Before its passage, properties were subjectively assessed according to their “highest and best use.” This led to property owners paying higher taxes merely because some government officials felt their properties could be put to better use.

“Under this subjective system, an assessor could decide, for example, that a farm on the outskirts of an urban area would be more valuable if it were turned into a midrise building, and could increase the farmer’s property tax to reflect the value of the theoretical building,” explains the California Tax Foundation in a new report reflecting on the 40-year anniversary.

With this subjective system, coupled with high inflation and the ease with which politicians could raise taxes, California property owners found themselves under constant pressure.

According to the California Tax Foundation report “The Evolution and Impact of Proposition 13: A Visual Guide to California’s Property Tax System,” property tax rates per $100,000 in 1977-78 included rates as high as 2.723 percent in San Bernardino County to 3.1 percent in Los Angeles County to 3.148 percent in Alameda County.

“Prior to passage of Proposition 13, property tax levies increased an average of 10.22 percent annually,” notes the California Tax Foundation, a rate of growth more than twice the rate of inflation at the time of 4.9 percent.

Proposition 13 changed that. With a few exceptions, it established a maximum property tax rate of 1 percent of the assessed value of the property. Now reassessments are no longer done annually and are based on the cost of the property at acquisition. It also put limits on increases for inflation at 2 percent annually. And it put in place requirements that a two-thirds vote of the Legislature is needed to raise taxes.

Surveys from the Public Policy Institute of California have reflected continued, strong support for Proposition 13. In March 2018, 65 percent of likely voters surveyed indicated that Proposition 13 has turned out to be “mostly a good thing.”

None of this is to say that there aren’t downsides, as there will always be trade-offs with any policy of this scope. Many property owners fear moving and facing substantially higher property taxes with their new property. One potential fix is a ballot initiative on the November ballot to allow homebuyers aged 55 or older or who are severely disabled to transfer their tax assessments to their new properties.

But fundamentally, Proposition 13 has been a needed buffer for property owners from the excessive taxation of the past and any reforms should remain consistent with the spirit of it when it was passed.

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